VOL XVII / ISSUE #1 / MARCH 13 for private circulation only RECOGNITION, CELEBRATION AND MOTIVATION. The year couldn’t have started any substantially increased the employment opportunities in better than this. Our pioneering Tier II, III & IV cities and towns. vision to make the common man, That’s not all. We have registered an encouraging growth irrespective of caste, colour and of `1969 crores in assets under management, as against creed, perfectly bankable has a reduction of Rs.1337 crores in the first quarter and a garnered global recognition. On growth of ` 405 crores in the second quarter. This signifies the occasion of the Financial that the holistic strategy we have adopted to address the Inclusion Day, Muthoot Finance regulatory restrictions imposed on Gold Loan NBFCs has was bestowed with the coveted worked wonders for us, giving us the necessary confidence Skoch Financial Inclusion Award and momentum to sustain growth in the coming year. In 2013 by Dr. C. Rangarajan, the turn, it improves our profitability metrics. Hon’ble Chairman, Economic We are also glad that the KUB Rao Committee Report is Advisory Council to the Prime now in public domain and the facts and recommendations Minister and former Governor of mentioned in the report dispel any negative perceptions the Reserve Bank of India. about our industry and business. The report underscores The prestigious award is indeed special because it recognizes that there are no systemic implications to domestic financial Muthoot Finance’s pioneering role and mission in building a stability because of the inter-connectedness between the sustainable economic model of financial inclusion specially gold loan NBFCs and the banking system. In fact, in the in the rural and semi-rural heartland of India. We are one final report of the working group that studied the issues of the first Indian companies to consider thousands of related to Gold and Gold Loans by NBFCs, it has been rural Indians as perfectly bankable, even before the term clearly stated that ‘Gold Loan NBFCs are doing a socially ‘financial inclusion’ became common parlance. useful function.’ With a growing customer base of over 6 million and serving Indeed, this is a perfect birthday gift to our Founder around 80,000 customers every day, we have not only (Banking), Late Shri. M. George Muthoot, and Founder been successful in changing the concept of gold loan from (Muthoot Group), Shri. Ninan Mathai Muthoot, whose birth a ‘desperate loan option’ to a ‘lifestyle banking product’, anniversaries were grandly celebrated across all branches and offices on February 4th and 5th respectively. Their but also in making the unorganized Non-Banking Financial vision inspires us. Their words are our guiding principles. Company (NFBC) sector into an organized space. We have Let’s march ahead and make them proud. Let the golden made gold jewellery, which was considered to be a static run continue. asset so far, into an economically productive asset and an Chairman economy driver. Our aggressive branch expansion has also M.G. George Muthoot Skoch Financial Inclusion Award Congratulations Muthoot Finance Ltd. M r . E a p e n received the Skoch Financial Alexander S/o. Inclusion Award 2013 for Mr. George ‘Access to Banking and A l e x a n d e r Financial Services’ at a Muthoot, glittering function held at Managing Hotel Shangri-La, Ashoka D i r e c t o r , Road, New Delhi. Mr. has joined M. G George Muthoot, the Muthoot Chairman, The Muthoot Group as Vice Group received the award President, on behalf of the company. Western India The award was conferred Region. He by Dr. C Rangarajan, Hon’ble Chairman, completed his bachelor’s degree from St. Economic Advisory Council Xavier’s College, Mumbai. He completed to the Prime Minister along his MSc. in International Political Economy with Mr. Sameer Kochhar, from London School of Economics. We wish Chairman, Skoch Group. him all success in his new assignment. The Edit Page ECONOMIC TIMES | MUMBAI | THURSDAY | 28 FEBRUARY 2013 A Halo for Gold Loan NBFCs on advances against gold Considering its massive transparency, internal jewellery to asking gold growth potential, gold controls, documentation, Guest Column loan companies and banks loans have been attracting grievance redressal to expand their gold loan a lot of companies, system and transparent GEORGE ALEXANDER MUTHOOT portfolio for monetising irrespective of their auctions will further idle gold to indicating no abilities. cement the customer’s he release immediate systemic risk, trust in existing players, The measures followed of Reserve we can safely assume gold helping the organised by the AGLOC, along with Bank of India’s loans aren’t influencers of sector grow further and the ones suggested by (RBI) KUB Rao gold imports, while playing bring in more uniformity. the committee, will act c o m m i t t e e a very important role of as a high entry barrier for That apart, higher loan- report on gold monetisation the idle gold those thinking of a foray tovalue consideration is has brought lying with the masses. a breath of fresh air. The into the lucrative business an indicator from the RBI awareness of gold loans And, with an estimated of gold loans. This high that it wants the sector had grown well beyond 20,000 tonnes of gold entry barrier would also to grow to monetise idle the south and gold loan holding in the country, 65% protect the interests of the gold through the organised players, especially the of which is thought to be existing players and ensure sector. Besides, higher biggies, have been growing held by the rural population, healthy competition loan-to-value should also at a brisk pace. The RBI the sector and other players and relationships. provide a muchneed are just scraping the surface impetus to growth, though had some concerns, which Second, banks would of the massive growth we also believe we should it laid down with a slew now be more comfortable potential. As regards still be given the same level of measures it deemed fit. in lending to the sector as certain measures that the playing field as banks. The While these were more these NBFCs are neither committee has redrawn, they report would also have of hygiene factors, what a systemic risk to the are aimed at better capital calmed investors’ nerves, followed was a dialogue financial system, nor, with adequacy, more operational as they were waiting between the gold loan their minimal exposure, transparency, achieving eagerly for this report. players and the regulator to could create a threat to better know your customer Now, valuations too would explain the business model, the banking sector. This (KYC) and protecting the reflect the fundamentals risk management measures, will now ensure a smooth customer’s interest. The of the company rather the role the sector played in flow of funds to the gold loan sector has already than regulatory overhangs financial inclusion and the sector. Third, existing or implemented this and, in the investors have been sector’s efforts to address potential customers would fact, has also formed a pondering over for the customers, who even have more clarity and a self-regulatory organisation last nine months. today are being exploited clearer perception of the under the Association by moneylenders and business. Besides, with Last but not the least, of Gold Loan Companies pawnbrokers. the hike in loan-to-value to the report has recognised (AGLOC) to address these that gold loan NBFCs have The Rao committee’s 75% under consideration, issues and ensure best a socially useful function. recommendations reiterate customers may not have practices for the sector. The RBI has been stressing this and articulate a perfect second thoughts on going the need for inclusive mix of what it feels about One important back to moneylenders growth, and gold loan the sector and what it implication of the report is or pawnbrokers to get an NBFCs, considering our is expected to do, going that the recommendation extra loan amount for their reach to the rural hinterland, forward. While the report will create a high entry jewellery. have been catering to the reiterates moderating barrier for the sector. Extra stress on better needs of the unbanked or the demand for gold underserved population imports considering its for decades now. Rather The Rao committee report is obvious impact on the than recognising us just current account deficit, it a perfect mix of assessing the sector and what its future is as a business or a sector, clearly mentions that gold it would be commendable loans have a casual impact It protects exististing player in the sector and allows banks if the regulator sees us as on gold imports. to be comfortable in lending a facilitator of financial By making a case of Rather than just a business, inclusion. Thus, future reviewing the loan-to-value the sector should be seen as regulation would ensure the ratio to 75% from 60% to aiding financial inclusion role of NBFCs is protected having no curbs or limits to support this cause. Article Published in the Economic Times (All Edition) CSR Initiatives Muthoot M George Memorial Altus Disputatio Research Award Muthoot Finance in association with National University of Advance Legal Studies, organized Altus Disputatio, a national level Debate Competition. Mr. George M Jacob, Director, The Muthoot Group has instituted an award of ` 2 lakhs in Muthoot Group distributed the prizes to the winners. Justice cash and a citation in memory of our founder Chairman Late P. N. Ravindran, Judge, High Court of Kerala; Prof. M.C. Mr. M. George Muthoot to be presented every year to the Valsan, former Secretary, Kerala Legislative Assembly and Mr.